When is it good for a California government to hold moneys in reserve for a rainy day?
Only when the governor or legislative leaders say so.
Recent so-called scandals have exposed a hypocrisy in state government. Gov. Brown and leading Democrats all talk up the virtues of rainy day funds. But they are only interested in those funds they control.
So they fought for voter approval of a new reserve fund back in 2014. And they have touted its growth.
But at the same time, they have declared war on other parts of the state that want to build reserves – against the very same volatile budget winds.
That’s the real story behind the legislature’s attack (backed by the state auditor) on a reserve fund at the University of California. The same impulse turned the discovery of a secret reserve fund at the state parks department into a scandal.
The most notorious recent example of the state’s “Reserves for Me But Not For Thee” stance involves local school districts. State law, passed as part of the deal that gave us the reserve fund, put a cap on reserve funds that local school districts can maintain. Teachers’ unions want districts to spend money, but districts understandably want larger reserves and more protection against the state, which has been taking away money from many districts (often via bailouts of the state teachers’ pension fund) faster than new tax revenues arrive.
John Myers of the L.A. Times reported recently on smart efforts to lift those reserve caps. But that will be an uphill fight.
The political reality is strong in California. If you’re in power, a reserve fund is good government. If you’re a victim of state budgeting and you keep a reserve fund to protect your government or agency, you’re corrupt and running a slush fund.